Index
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11
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12. Income Taxes

Accounting policies

In Germany, a uniform corporate income tax rate of 15.0% as well as a solidarity surcharge of 5.5% thereon are levied on all distributed and retained earnings. In addition to corporate income tax, income generated in Germany is subject to a trade tax. It varies depending on the municipality in which the company is represented. The weighted average tax rate was 14.6% in 2024 (previous year: 14.6%). The 30% rate used to calculate deferred taxes for German Group companies remained unchanged in 2024. The income of foreign Group companies is assessed using the tax rates applicable in their respective countries.

Deferred taxes are recorded for temporary differences between the carrying amount of assets and liabilities in the financial statements according to IFRS and the carrying amounts for tax purposes as well as for tax loss carryforwards and unused tax credits. These also comprise temporary differences arising from business combinations, with the exception of goodwill. Deferred tax assets and liabilities are calculated using the respective country-specific tax rates applicable for the period in which the asset or liability is realized or settled. Tax rate changes enacted or substantively enacted on or before the balance sheet date are taken into consideration.

Deferred tax assets are offset against deferred tax liabilities provided they are related to the same taxation authority. Surpluses of deferred tax assets are only recognized provided the tax benefits are likely to be realized. The valuation of deferred tax assets is based on the assessment of the ability to utilize tax loss carryforwards and unused tax credits. This depends on whether future taxable profits will exist during the period in which temporary differences are reversed and in which tax loss carryforwards and unused tax credits can be claimed. The assessment of recoverability of deferred tax assets is based on internal projections of the future earnings of the particular taxable entity.

Changes in deferred taxes in the balance sheet are recorded as deferred tax expense or income unless the underlying transaction is recognized directly in equity or in income and expenses recognized in equity. For those effects which have been recognized in equity, changes to deferred tax assets and tax liabilities are also recognized directly in equity.

Deferred tax liabilities are recognized for differences between the proportional IFRS equity and the tax base of the investment in a consolidated subsidiary if a reversal of these differences is expected in the foreseeable future. Deferred tax liabilities are recognized for dividend distributions planned for the following year if these distributions lead to a reversal of temporary differences.

Provisions for German trade tax, corporate income tax and similar income taxes are calculated and recognized based on the expected taxable income of the consolidated companies less any prepayments that have been made. Provisions are set up for interest accrued. This interest is reported under other financial result, not tax expense. Other taxes to be assessed are considered accordingly.

IFRIC 23 clarifies the application of the recognition and measurement policies from IAS 12 when there is uncertainty regarding income tax-related treatment of individual transactions. They are accounted for with the assumption that tax authorities will examine the questionable transaction and have all relevant information. The amount of risk provisions is calculated and reviewed with consideration for the results of past tax audits as well as the legal assessment of not yet audited transactions and the risk of a deviating tax-related interpretation by the tax authorities. The most probable value of the individual risks is recognized.

BASF falls within the scope of the OECD Pillar Two Model Rules. The relevant Pillar Two legislation was enacted in Germany and has been applied since January 1, 2024.

BASF applies the exception in IAS 12 whereby no deferred tax assets or liabilities are recognized in connection with Pillar Two income taxes under the OECD Model Rules; nor are any disclosures regarding the matter provided.

Tax expense and tax rate

The BASF Group tax rate amounted to 29.8% in 2024 and 73.3% in the previous year. In both years, the tax rate was impacted by the nonrecognition of deferred tax assets, especially in Germany.

The application of the Pillar Two legislation resulted in an additional expense of €22 million, which was included in income taxes.

The tax effects of various underlying matters are presented in the following reconciliation of income taxes and the effective tax rate.

Tax expense
Million €	2024	2023
Current tax expense	1,014	1,102
Corporate income tax, solidarity surcharge and trade taxes (Germany)	24	3
Foreign income tax	1,084	1,187
Taxes for prior years	–94	–87
Deferred tax expense (+) / income (–)	–398	–61
From changes in temporary differences	–312	–306
From changes in tax loss carryforwards/unused tax credits	31	–27
From changes in the tax rate	5	–1
From the adjustment of valuation allowances for deferred tax assets	–122	273
Income taxes	616	1,041

Reconciliation of income taxes and the effective tax rate
	2024		2023
	Million €	%	Million €	%
Income before income taxes	2,069		1,420
Expected tax based on German tax rate (30%)	621	30.0	426	30.0
Foreign tax rate differential	–241	–11.7	–332	–23.3
Tax-exempt income	–226	–10.9	–128	–9.0
Nondeductible expenses	345	16.7	291	20.5
Income of companies accounted for using the equity method (income after taxes)	–196	–9.5	–23	–1.6
Taxes for prior years (current and deferred taxes)	–72	–3.5	–212	–14.9
Deferred tax liabilities for the future reversal of temporary differences associated with shares in participating interests	–30	–1.4	19	1.4
Changes in the tax rate	5	0.2	–1	–0.1
Nonrecognition / changes in valuation allowances for deferred tax assets	357	17.2	865	60.9
Other	55	2.7	135	9.5
Income taxes / effective tax rate	616	29.8	1,041	73.3

Deferred taxes

Deferred taxes are shown in the following table based on the corresponding balance sheet items.

Deferred tax assets and liabilities 2024
Million €	Jan. 1, 2024, net	Effects recognized in income	Effects recognized in equity (OCI)	Business combinations	Other	Dec. 31, 2024, net	Deferred tax assets	Deferred tax liabilities
Intangible assets	–678	148	7	–1	2	–522	193	–715
Property, plant and equipment	–1,363	42	–64	2	–1	–1,384	172	–1,556
Financial assets	18	–3	–6	–	–6	2	12	–10
Inventories and accounts receivable	–602	122	–15	1	3	–491	330	–821
Provisions for pensions and similar obligations	862	41	–213	–1	–1	688	856	–168
Other provisions and liabilities	1,122	–11	–49	–	3	1,064	1,368	–304
Tax loss carryforwards	163	59	–18	–	1	205	205	–
Other	–44	2	49	–	–	7	53	–46
Deferred tax assets (liabilities) before netting	–522	400	–309	1	1	–431	3,189	–3,620
Netting	–	–	–	–	–	–	–2,615	2,615
Deferred tax assets (liabilities) after netting	–522	400	–309	1	1	–431	574	–1,005

Deferred tax assets and liabilities 2023
Million €	Jan. 1, 2023, net	Effects recognized in income	Effects recognized in equity (OCI)	Business combinations	Other	Dec. 31, 2023, net	Deferred tax assets	Deferred tax liabilities
Intangible assets	–742	101	–35	–	–1	–678	67	–745
Property, plant and equipment	–1,377	–45	57	2	–	–1,363	147	–1,510
Financial assets	–21	44	–7	–	2	18	16	2
Inventories and accounts receivable	–672	33	38	–1	–	–602	365	–967
Provisions for pensions and similar obligations	789	–19	94	–	–1	862	992	–130
Other provisions and liabilities	976	165	–19	–	–1	1,122	1,390	–268
Tax loss carryforwards	370	–203	–4	–	–	163	163	–
Other	15	–20	–39	–	1	–43	9	–54
Deferred tax assets (liabilities) before netting	–663	56	84	–	–	–522	3,149	–3,671
Netting	–	–	–	–	–	–	–2,531	2,531
Deferred tax assets (liabilities) after netting	–663	56	84	–	–	–522	617	–1,140

Deferred tax assets on deductible temporary differences in the amount of €694 million (previous year: €1,057 million) were not recognized in 2024, as their utilization at reversal was not reasonably certain.

No deferred tax liabilities on income or withholding taxes were recognized for temporary differences from undistributed earnings of subsidiaries as these earnings are either not subject to taxation on payout or are expected to be reinvested for an indefinite period of time. The deferred tax liabilities not recognized in this context amounted to €156 million in 2024 (previous year: €175 million).

Tax loss carryforwards

No deferred tax assets were recognized for tax loss carryforwards of €11,825 million (of which €5,046 million relate to German corporate income tax, €5,251 million to German trade tax, and €241 million each to the German interest barrier for corporate income tax and trade tax) in 2024 (previous year: €9,062 million). Of these, €2 million will expire in 2025, €9 million in 2026, €16 million in 2027, €5 million in 2028, €297 million in 2029, and €253 million in 2030 and thereafter. The remaining €11,243 million will not expire.

Net surpluses of deferred tax assets for companies that reported tax losses in 2024 or 2023 totaled €104 million as of December 31, 2024 (previous year: €254 million). Deferred taxes were recognized because, due to planned earnings, the use of temporary differences or loss carryforwards is expected.

Income tax liabilities

Income tax liabilities include assessed income taxes as well as estimated income taxes not yet assessed for the current year.

Contingent liabilities related to income taxes amounted to €89 million (previous year: €97 million).

Policy

In this report, we use the word policy or requirement to describe internal frameworks that set out the fundamental guidelines of our company. At BASF, policies are set by the Board of Executive Directors and define principles relating to a specific topic. Separate requirements define the processes for implementing a policy.

BASF Report 2024